| Thu 13 Nov 2008, 17:00 | | EPS - Eastern Platinum - Consolidated Financial Statements Of Eastern Platinum |
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EPS
EPS
EPS - Eastern Platinum - Consolidated Financial Statements Of Eastern Platinum
Limited September 30, 2008 (Unaudited)
EASTERN PLATINUM LIMITED
(Incorporated in Canada)
(Canadian Registration number BC0722783)
(South African Registration number 2007/006318/10)
Share Code TSX: ELR ISIN: CA2768551038
Share Code AIM: ELR ISIN: CA2768551038
Share Code JSE: EPS ISIN: CA2768551038
CONSOLIDATED FINANCIAL STATEMENTS OF EASTERN PLATINUM LIMITED SEPTEMBER 30, 2008
(UNAUDITED)
Consolidated statements of operations
(Expressed in thousands of U.S. dollars, except per share amounts - unaudited)
Three months ended
September 30, September 30,
2008 2007
Revenue $ 9,291 $ 31,452
Cost of operations
Production costs 20,629 20,416
Depletion and depreciation 4,716 3,972
25,345 24,388
Mine operating earnings (loss) (16,054) 7,064
Expenses
General and administrative 5,585 3,480
Stock-based compensation 278 54
5,863 3,534
Operating income (loss) (21,917) 3,530
Other income (expense)
Interest income 1,975 2,188
Interest expense (659) (779)
Foreign exchange gain (loss) (28) (5,344)
Income (loss) before income taxes (20,629) (405)
and non-controlling interests
Future income tax (expense) 6,363 (376)
recovery
Non-controlling interests (Note 8) 3,705 (609)
Net earnings (loss) for the period $ (10,561) $ (1,390)
Earnings (loss) per share
Basic $ (0.02) $ (0.00)
Diluted $ (0.02) $ (0.00)
Weighted average number of common
share outstanding
Basic 680,245,010 667,834,880
Diluted 680,245,010 667,834,880
Nine months ended
September 30, September 30,
2008 2007
Revenue $ 115,842 $ 85,108
Cost of operations
Production costs 61,437 58,032
Depletion and depreciation 13,528 6,365
74,965 64,397
Mine operating earnings (loss) 40,877 20,711
Expenses
General and administrative 15,227 12,267
Stock-based compensation 1,845 14,278
17,072 26,545
Operating income (loss) 23,805 (5,834)
Other income (expense)
Interest income 6,285 3,769
Interest expense (2,821) (4,180)
Foreign exchange gain (loss) 1,100 (8,224)
Income (loss) before income taxes 28,369 (14,469)
and non-controlling interests
Future income tax (expense) (7,417) 914
recovery
Non-controlling interests (Note 8) 1,154 (2,467)
Net earnings (loss) for the period $ 22,106 $ (16,022)
Earnings (loss) per share
Basic $ 0.03 $ (0.03)
Diluted $ 0.03 $ (0.03)
Weighted average number of common
share outstanding
Basic 675,978,818 598,287,756
Diluted 705,249,374 598,287,756
See accompanying notes to the unaudited consolidated financial statements.
Eastern Platinum Limited
Consolidated balance sheets
(Expressed in thousands of U.S. dollars - unaudited)
September 30, December 31,
2008 2007
Assets
Current assets
Cash and cash equivalents $ 169,294 $ 18,818
Short-term investments 2,766 171,038
Trade receivables 5,533 33,157
Inventories (Note 3) 6,771 6,888
Future income taxes 2,753 -
187,117 229,901
Property, plant and equipment (Note 4) 766,611 813,461
Refining contract (Note 5) 14,226 18,467
Other assets 1,104 1,247
$ 969,058 $ 1,063,076
Liabilities
Current liabilities
Accounts payable and accrued
liabilities $ 30,688 $ 22,967
Future income taxes - 6,416
Current portion capital leases 681
Current loans 3,195 3,837
34,564 33,220
Asset retirement obligation (Note 6) 2,613 2,889
Capital leases 3,842 9,127
Future income taxes 133,227 143,616
174,246 188,852
Non-controlling interests (Note 8) 18,495 23,402
Commitments (Note 11)
Shareholders` equity
Share capital (Note 7) 889,720 868,045
Contributed surplus 29,037 27,428
Accumulated other comprehensive
income (loss) (96,414) 23,481
Deficit (46,026) (68,132)
(142,440) (44,651)
776,317 850,822
$ 969,058 $ 1,063,076
Approved by the Board
"David Cohen" "Robert Gayton"
David Cohen, Director Robert Gayton, Director
See accompanying notes to the unaudited consolidated financial statements.
Eastern Platinum Limited
Consolidated statements of shareholders` equity
(Expressed in thousands of U.S. dollars - unaudited)
Common Shares
Without Par Value
Shares Amount
Balance, June 30, 2007 667,778,358 $ 865,103
Warrants exercised 100,000 178
Stock options exercised 1,153,333 2,764
Stock-based compensation - -
Net earnings for the period - -
Currency translation adjustment - -
Balance, December 31, 2007 669,031,691 868,045
Warrants exercised 10,824,077 21,213
Stock options exercised 395,686 462
Stock-based compensation - -
Net earnings for the period - -
Currency translation adjustment - -
Balance, September 30, 2008 680,251,454 $ 889,720
Contributed Deficit
Surplus
Balance, June 30, 2007 $ 17,897 $ (55,928)
Warrants exercised - -
Stock options exercised (720) -
Stock-based compensation 10,251 -
Net earnings for the period - (12,204)
Currency translation adjustment - -
Balance, December 31, 2007 27,428 (68,132)
Warrants exercised - -
Stock options exercised (236) -
Stock-based compensation 1,845 -
Net earnings for the period - 22,106
Currency translation adjustment - -
Balance, September 30, 2008 $ 29,037 $ (46,026)
Accumulated Other Total
Comprehensive Shareholders`
Income (Loss) Equity
Balance, June 30, 2007 $ (23,024) $ 804,048
Warrants exercised - 178
Stock options exercised - 2,044
Stock-based compensation - 10,251
Net earnings for the period - (12,204)
Currency translation adjustment 46,505 46,505
Balance, December 31, 2007 23,481 $ 850,822
Warrants exercised - 21,213
Stock options exercised - 226
Stock-based compensation - 1,845
Net earnings for the period - 22,106
Currency translation adjustment (119,895) (119,895)
Balance, September 30, 2008 $ (96,414) $ 776,317
Consolidated statements of comprehensive income (loss)
(Expressed in thousands of U.S. dollars - unaudited)
Three months ended
September 30, September 30,
2008 2007
Net earnings (loss) for the period before
other comprehensive loss $ (10,561) $ (1,390)
Other comprehensive income (loss) - currency (45,656) 42,290
translation adjustment
Comprehensive income (loss) $ (56,217) $ 40,900
Nine months ended
September 30, September 30,
2008 2007
Net earnings (loss) for the period before
other comprehensive loss $ 22,106 $ (16,022)
Other comprehensive income (loss) - currency (119,895) 72,020
translation adjustment
Comprehensive income (loss) $ (97,789) $ 55,998
See accompanying notes to the unaudited consolidated financial statements.
Eastern Platinum Limited
Consolidated statements of cash flows
(Expressed in thousands of U.S. dollars - unaudited)
Three months ended
Sept 30, 2008 Sept 30, 2007
Operating activities
Net earnings (loss) for the period $ (10,561) $ (1,390)
Items not involving cash
Accretion (Note 6) 67 87
Depletion and depreciation 4,716 3,972
Stock-based compensation 278 54
Foreign exchange (gain) loss 28 5,344
Future income tax expense (recovery) (6,3 63) 376
Non-controlling interests (3,7 05 ) 609
(15,540) 9,052
Net changes in non-cash working
capital items
Trade receivables 37,226 (3,470)
Inventories (832) (1,556)
Accounts payable and accrued liabilities 6,229 1,058
27,083 5,084
Financing activities
Common shares issued for cash, net
of share issue costs - 181
Short-term debt 56 -
Other long-term liabilities 1,533 -
1,589 181
Investing activities
Purchase of debt - -
Acquisitions, net of cash acquired - -
Maturity of short-term investments 101,195 18,379
Property, plant and equipment expenditures (42,896) (12,417)
58,299 5,962
Effect of exchange rate changes on cash
and cash equivalents (8,411) (1,082)
Increase in cash and cash equivalents 78,560 10,145
Cash and cash equivalents, beginning of
period 90,734 6,192
Cash and cash equivalents, end of period $ 169,294 $ 16,337
Cash and cash equivalents are comprised of:
Cash in bank $ 9,916 $ 15,399
Short-term money market instruments 159,378 938
$ 169,294 $ 16,337
Supplementary cash flow information
Interest paid $ 2 $ 504
Income taxes paid $ - $ -
Nine months ended
Sept 30, 2008 Sept 30, 2007
Operating activities
Net earnings (loss) for the period $ 22,106 $ (16,022)
Items not involving cash
Accretion (Note 6) 233 546
Depletion and depreciation 13,528 6,365
Stock-based compensation 1,845 14,278
Foreign exchange (gain) loss (1,100) 7,397
Future income tax expense (recovery) 7,417 (914)
Non-controlling interests (1,154) 2, 67
42,875 14,117
Net changes in non-cash working
capital items
Trade receivables 23,905 1,492
Inventories (1,188) 1,779
Accounts payable and accrued liabilities 12,462 5,399
78,054 22,787
Financing activities
Common shares issued for cash, net
of share issue costs 21,440 228,596
Short-term debt 348 (31,410)
Other long-term liabilities (1,737) 6,023
20,051 203,209
Investing activities
Purchase of debt - 8,563
Acquisitions, net of cash acquired - (51,215)
Maturity of short-term investments 163,520 (1 20,646)
Property, plant and equipment expenditures (101,245) (51,459)
62,275 (214,757)
Effect of exchange rate changes on cash
and cash equivalents (9,904) 463
Increase in cash and cash equivalents 150,476 11,702
Cash and cash equivalents, beginning of
period 18,818 4,635
Cash and cash equivalents, end of period $ 169,294 $ 16,337
Cash and cash equivalents are comprised of:
Cash in bank $ 9,916 $ 15,399
Short-term money market instruments 159,378 938
$ 169,294 $ 16,337
Supplementary cash flow information
Interest paid $ 365 $ 695
Income taxes paid $ 69 $ -
See accompanying notes to the unaudited consolidated financial statements.
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
1. Nature of operations
Eastern Platinum Limited (the "Company") is a platinum group metal ("PGM")
producer engaged in the mining, exploration and development of PGM properties
located in various provinces in South Africa.
Effective July 1, 2007, the Company changed its fiscal year end from June 30 to
December 31 to better align with financial reporting year ends that are
predominant in the mining industry.
2. Summary of significant accounting policies
These unaudited interim consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles ("Canadian
GAAP"). The preparation of financial data is based on accounting principles and
practices consistent with those used in the preparation of the audited annual
financial statements except as noted below. These unaudited interim financial
statements should be read in conjunction with the Company`s audited
consolidated financial statements for the six months ended December 31, 2007,
as they do not contain all disclosures required by Canadian GAAP for annual
financial statements.
(a) Adoption of new accounting standards and accounting pronouncements
Effective January 1, 2008, the Company adopted four new accounting standards
that were issued by the Canadian Institute of Chartered Accountants. These
accounting policy changes were adopted on a prospective basis with no
restatement of prior period financial statements.
(i) Financial Instrument Disclosures and Presentation
CICA Handbook Sections 3862 "Financial Instruments - Disclosures" and Section
3863 "Financial Instruments - Presentation" replace Section 3861 "Financial
Instruments - Disclosure and Presentation". The new standards carry forward the
presentation requirements for financial instruments and enhance the disclosure
requirements by placing increased emphasis on disclosures about the nature and
extent of risks arising from financial instruments and how the entity manages
those risks.
(ii) Capital Disclosures
CICA Handbook Section 1535 requires the company to disclose (a) its objectives,
policies and processes for managing capital; (b) quantitative data about what
the entity regards as capital; (c) whether the entity has complied with any
capital requirements; and (d) if it has not complied, the consequences of such
non-compliance.
(iii) Inventories
CICA Handbook Section 3031 replaced the existing inventories standard. The new
standard requires inventory to be valued on a first-in, first-out or weighted
average basis, which is consistent with the Company`s current treatment. The
adoption of CICA 3031 did not have a significant impact on the Company`s
accounting for inventory or associated disclosures as at January 1, 2008 or for
the nine months ended September 30, 2008.
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
2. Summary of significant accounting policies (continued)
(b) International Financial Reporting Standards
In February 2008, the CICA announced that Canadian generally accepted
accounting principles ("GAAP") for publicly accountable enterprises will be
replaced by International Financial Reporting Standards ("IFRS") for fiscal
years beginning on or after January 1, 2011. Companies will be required to
provide IFRS comparative information for the previous fiscal year.
Accordingly the conversion from Canadian GAAP to IFRS will be applicable to
the Company`s reporting for the first quarter of 2011 for which the current
and comparative information will be prepared under IFRS. The Company expects
the transition to IFRS to impact accounting, financial reporting, and IT
systems and processes. The Company is currently assessing the impact of the
transition to IFRS. Training and additional resources have been engaged to
ensure the timely conversion to IFRS.
3. Inventories
September 30, December 31,
2008 2007
Consumables $ 6,316 $ 5,446
Ore and concentrate 455 1,442
$ 6,771 $ 6,888
4. Property, plant and equipment
September 30, 2008
Accumulated
depreciation/ Net book
Cost depletion value
Mining plant and equipment $ 362,951 $ 151,030 $ 211,921
Mineral properties
Crocodile River Mine (a) 123,743 15,666 108,077
Kennedy`s Vale Project (b) 318,653 12,911 305,742
Spitzkop PGM Project (c) 114,338 - 114,338
Mareesburg JV (c) 26,426 - 26,426
Other property, plant and
equipment 127 20 107
$ 946,238 $ 179,627 $ 766,611
December 31, 2007
Accumulated
depreciation/ Net book
Cost depletion value
Mining plant and equipment $ 216,380 $ 58,597 $ 157,783
Mineral properties
Crocodile River Mine (a) 138,163 9,711 128,452
Kennedy`s Vale Project (b) 377,804 238 377,566
Spitzkop PGM Project (c) 121,442 - 121,442
Mareesburg JV (c) 28,076 - 28,076
Other property, plant and
equipment 191 49 142
$ 882,056 $ 68,595 $ 813,461
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
4. Property, plant and equipment (continued)
(a) Crocodile River Mine ("CRM")
The Company holds directly and indirectly 85% of CRM, which is located on the
eastern portion of the western limb of the Bushveld Complex. The Maroelabult,
Zandfontein, and Crocette sections are currently in production with the
Kareespruit deposit and other potential near-surface opportunities being in the
development stages.
(b) Kennedy`s Vale Project ("KV")
The Company holds directly and indirectly 85% of KV, which is located on the
eastern limb of the Bushveld Complex, near Steelpoort in the Province of
Mpumalanga. It comprises PGM mineral rights on five farms in the Steelpoort
Valley.
(c) Spitzkop PGM Project and Mareesburg Joint Venture
The Company holds directly and indirectly a 93.4% interest in the Spitzkop PGM
Project and a 75.5% interest in the Mareesburg project. The Company currently
acts as the operator of both the Mareesburg Platinum Project Joint Venture and
Spitzkop PGM Project, both located on the eastern limb of the Bushveld Complex.
5. Refining Contract
As at September 30, 2008, the refining contract had a total aggregate value of
$14,226. The value of the contract is amortized on a units-of-production basis.
The amortization expense for the three and nine months ended September 30, 2008
was $355 and $1,078 respectively. The accumulated amortization at September 30,
2008 was $5,352.
6. Asset retirement obligation
Although the ultimate amount of the asset retirement obligation is uncertain,
the fair value of these obligations is based on information currently
available, including closure plans and applicable regulations. Significant
closure activities include land rehabilitation, demolition of buildings and
mine facilities and other costs.
The liability for the asset retirement obligation at September 30, 2008 is
approximately ZAR21.8 million ($2,613). The undiscounted value of this
liability is approximately ZAR92 million ($11,031). An accretion expense
component of approximately $67 for the three months ended September 30, 2008
and $233 for the nine months ended September 30, 2008 (6 months ended December
31, 2007 - $180) has been charged to operations for the corresponding period
ended September 30, 2008 to reflect an increase in the carrying amount of the
asset retirement obligation which has been determined using a discount rate of
13%. Changes to the asset retirement obligation during the nine months ended
September 30, 2008 are as follows:
Balance, December 31, 2007 $ 2,889
Foreign exchange movement (509)
Accretion 233
Balance September 30, 2008 $ 2,613
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
7. Share capital
(a) Authorized
- Unlimited number of preferred redeemable, voting, non-participating shares
without nominal or par value
- Unlimited number of common shares with no par value
(b) Stock options
The Company has an incentive plan (the "2008 Plan"), approved by the Company`s
shareholders at its annual general meeting held on June 4, 2008, under which
options to purchase common shares may be granted to its directors, officers,
employees and others at the discretion of the Board of Directors. Under the
terms of the 2008 Plan, 75 million common shares are reserved for issuance upon
the exercise of options. All outstanding options at June 4, 2008 granted under
the Company`s previous plan (the "2005 Plan") will continue to exist under the
2008 Plan provided that the fundamental terms governing such options will be
deemed to be those under the 2005 Plan. Upon adoption of the 2008 Plan, options
to purchase a total of 27,525,000 common shares were available for grant under
the 2008 Plan, representing 75,000,000 less the 47,475,000 outstanding options
at June 4, 2008 granted under the 2005 Plan.
Under the 2008 Plan, each option granted shall be for a term not exceeding five
years from the date of being granted and the vesting period is determined based
on the discretion of the Board of Directors. The option exercise price is set
at the date of the grant and cannot be less than the closing market price of
the Company`s common shares on the Toronto Stock Exchange on the day
immediately preceding the day of the grant of the option. The changes in stock
options during the nine months ended September 30, 2008 were as follows:
September 30, December 31,
2008 2007
Weighted Weighted
average average
Number of exercise Number of exercise
options price options price
Cdn$ Cdn$
Balance
outstanding,
beginning of
period 46,360,000 1.94 32,450,000 1.76
Options
granted 1,500,000 3.38 15,180,000 2.31
Options
exercised (570,000) 1.60 (1,153,333) 1.79
Options
cancelled (230,000) 2.76 (116,667) 1.70
Balance
outstanding,
end of period 47,060,000 1.99 46,360,000 1.94
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
7. Share capital (continued)
The following table summarizes information concerning outstanding and
exercisable options at September 30, 2008:
Remaining
Options Options Exercise Contractual
outstanding exercisable price Life (Years) Expiry date
Cdn$
550,000 550,000 0.56 0.10 November 28, 2008
187,500 187,500 1.00 0.90 August 26, 2009
7,475,000 7,475,000 1.70 2.65 May 24, 2011
250,000 250,000 1.70 3.16 November 27, 2011
22,187,500 22,187,500 1.82 3.44 March 7, 2012
14,880,000 12,880,000 2.31 9.02 October 5, 2017
90,000 30,000 2.50 9.21 December 12, 2017
1,000,000 600,000 3.38 9.40 February 20, 2018
440,000 180,000 3.38 9.49 March 27, 2018
47,060,000 44,340,000 5.22
(c) Share purchase warrants
The changes in warrants during the nine months ended September 30, 2008 were as
follows:
September 30, 2008 December 31, 2007
Weighted Weighted
average average
Number of exercise Number of exercise
warrants price warrants price
Cdn$ Cdn$
Balance outstanding,
beginning of period 71,248,050 1.83 71,348,050 1.83
Warrants exercised (10,824,077) 1.97 - -
Warrants expired (1,937,977) 2.00 (100,000) 1.80
Balance outstanding,
end of period 58,485,996 1.80 71,248,050 1.83
At September 30, 2008, the Company had 58,485,996 warrants outstanding, each
warrant exercisable at Cdn$1.80 per common share and expiring on March 28,
2009.
8. Non-controlling interests
The non-controlling interests are comprised of the following:
Balance, December 31, 2007 $ 23,402
Non-controlling interests` share of income in Barplats 1,523
Non-controlling interests` share of interest on advances to
Gubevu (2,677)
Foreign exchange movement (3,753)
Balance, September 30, 2008 $ 18,495
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
9. Related party transactions
The Company incurred the following expenses in the normal course of operations,
measured at the exchange amount which is determined on a cost recovery basis,
with companies related by way of directors and officers in common:
Three months ended Nine months ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2008 2007 2008 2007
Consulting fees (a) $ 20 $ 96 $ 62 $ 275
General and
administrative expenses 73 - 228 99
Management fees (b) 302 115 971 334
Rent - - - 305
$ 395 $ 211 $ 1,261 $ 1,013
(a) The Company paid fees to a private company controlled by a director of
the Company for consulting services performed outside of his capacity as
a director.
(b) The Company paid management fees and expenses to private companies
controlled by officers and directors of the Company.
(c) Amounts due to related parties are unsecured, non-interest bearing and
due on demand. Accounts payable at September 30, 2008 included $49 (Dec
31, 2007 - $2,550) which were due to private companies controlled by
officers of the Company.
10. Segmented information
(a) Operating segment - The Company`s operations are primarily directed
towards the acquisition, exploration and production of Platinum Group
Metals in South Africa.
(b) Geographic segments - The Company`s revenues and expenses by geographic
areas for the three and nine months ended September 30, 2008 and 2007
are as follows:
September 30, 2008 (3 months)
South Africa Canada Total
Property, plant and equipment 766,517 94 766,611
Total assets 783,884 185,174 969,058
Property, plant and
equipment expenditures 42,896 - 42,896
Revenues $ 9,291 $ - $ 9,291
Production costs (20,629) - (20,629)
Depletion and depreciation (4,716) - (4,716)
Expenses (4,269) (1,316) (5,585)
Stock based compensation (278) - (278)
Interest income 230 1,745 1,975
Interest expense (570) (89) (659)
Foreign exchange gain (loss) (70) 42 (28)
Income (loss) before income taxes
and non-controlling interests $ (21,011) $ 382 $ (20,629)
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
10. Segmented information (continued)
September 30, 2007 (3 months)
South Africa Canada Total
Property, plant and
equipment expenditures 12,417 - 12,417
Revenues $ 31,452 $ - $ 31,452
Production costs (20,416) - (20,416)
Depletion and depreciation (3,972) - (3,972)
Expenses (2,443) (1,037) (3,480)
Stock-based compensation - ( 54) (54)
Interest income - 2,188 2,188
Interest expense (779) - (779)
Foreign exchange loss (939) (4,405) (5,344)
Income (loss) before income
taxes
and non-controlling interests $ 2,903 $ (3,308) $ (405)
September 30, 2008 (9 months)
South Africa Canada Total
Property, plant and
equipment expenditures 103,939 (2,694) 101,245
Revenues $ 115,842 $ - $ 115,842
Production costs (61,437) - (61,437)
Depletion and depreciation (13,528) - (13,528)
Expenses (11,227) (4,000) (15,227)
Stock-based compensation (1,271) (574) (1,845)
Interest income 1,721 4,564 6,285
Interest expense (2,821) - (2,821)
Foreign exchange gain 1,035 65 1,100
Income before income taxes
and non-controlling interests $ 28,314 $ 55 $ 28,369
September 30, 2007 (9 months)
South Africa Canada Total
Property, plant and
equipment expenditures 51,356 103 51,459
Revenues $ 85,108 $ - $ 85,108
Production costs (58,032) - (58,032)
Depletion and depreciation (6,358) (7) (6,365)
Expenses (8,319) (3,948) (12,267)
Stock-based compensation (144) (14,134) (14,278)
Interest income (123) 3,892 3,769
Interest expense (4,180) - (4,180)
Foreign exchange loss (3,816) (4,408) (8,224)
Income (loss) before income
taxes
and non-controlling interests $ 4,136 $ (18,605) $ (14,469)
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
10. Segmented information (continued)
(b) Geographic segments (continued)
December 31, 2007
South Africa Canada Total
Property, plant and equipment 813,378 83 813,461
Total assets 871,790 191,286 1,063,076
For the period ended September 30, 2008 and 2007, 100% of the Company`s PGM
production was sold to one customer (Note 13(b)).
11. Commitments
The Company has committed to capital expenditures on projects of approximately
402 million Rand ($48,144) as at September 30, 2008.
12. Management of capital risk
The capital structure of the Company consists of equity attributable to common
shareholders, comprising of issued capital, contributed surplus, retained
earnings and accumulated other comprehensive income. The Company`s objectives
when managing capital are to: (i) preserve capital, (ii) obtain the best
available net return, and (iii) maintain liquidity.
The Company manages the capital structure and makes adjustments to it in light
of changes in economic condition and the risk characteristics of the underlying
assets. To maintain or adjust the capital structure, the Company may attempt to
issue new shares, issue new debt, acquire or dispose of assets or adjust the
amount of cash and cash equivalents and investments.
The Company`s policy is to invest its excess cash in highly liquid, fully
guaranteed, bank-sponsored instruments. The Company staggers the maturity
dates of its investments over different time periods and dates to minimize
exposure to interest rate changes. This strategy is unchanged from 2007.
The Company is not subject to externally imposed capital requirements.
13. Management of financial risk
The Company`s financial instruments are exposed to certain financial risks,
including price risk, currency risk, credit risk, liquidity risk, and interest
risk. The Company`s exposure to these risks and its methods of managing the
risks remain consistent.
(a) Price risk
The Company is exposed to price risk with respect to the revenues and costs of
production. Revenues are affected by fluctuations in both the prices of
platinum group metals and exchange rates. Costs of production include
electricity, labour, and diesel amongst others. The Company closely monitors
these prices to determine the appropriate course of action to be taken by the
Company. The Company has not entered into any derivative financial instruments
to manage exposures to price fluctuations.
A sensitivity analysis has not been completed at September 30, 2008 as it would
not be representative of the actual risk. The future costs of production are
unknown and are expected to change frequently.
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
13. Management of financial risk (continued)
(b) Currency risk
The Company is exposed to the financial risk related to the fluctuation of
foreign exchange rates. The Company receives revenue in South African Rand,
incurs expenses in Canadian dollars and South African Rand and its reporting
currency is the US dollar. A significant change in the currency exchange rates
between the Canadian dollar and South African Rand relative to the US dollar
could have an effect on the Company`s results of operations, financial position
or cash flows. The Company has not entered into any derivative financial
instruments to manage exposures to currency fluctuations.
At September 30, 2008, the Company is exposed to currency risk through the
following financial instruments denominated in South African Rand and Canadian
dollars:
September 30, 2008 December 31, 2007
(000`s (000`s (000`s (000`s
Cdn$) ZAR) Cdn$) ZAR)
Cash and cash equivalents $ 161,756 144,441 $ 18,107 3,326
Short-term investments 2,944 - 169,546 -
Trade receivables 1,653 33,237 1,880 215,195
Short-term liabilities 3,246 6,891 3,804 -
Long-term liabilities - 32,095 3,294 39,958
Accounts payable and accruals 542 252,183 3,646 132,797
The sensitivity of the Company`s net earnings and other comprehensive income
due to changes in the exchange rate between the Canadian dollar and the South
African Rand is summarized in the tables below:
3 months ended Sept. 30, 2008
10% 10%
increase in decrease in
Canadian Canadian
dollar dollar
Increase (decrease) in net earnings (2,367) 5,747
Increase (decrease) in other
comprehensive income 1,682 (2,384)
Comprehensive income (loss) (685) 3,363
9 months ended Sept. 30, 2008
10% 10%
increase in decrease in
Canadian Canadian
dollar dollar
Increase (decrease) in net earnings (4,459) 8,305
Increase (decrease) in other
comprehensive income (39,802) 48,602
Comprehensive income (loss) (44,261) 56,907
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
13. Management of financial risk (continued)
(b) Currency risk (continued)
The sensitivity of the Company`s net earnings and other comprehensive income
due to changes in the exchange rate between the Canadian dollar and the United
States dollar is summarized in the tables below:
3 months ended Sept. 30, 2008
10% 10%
increase in decrease in
Canadian Canadian
dollar dollar
Increase (decrease) in net earnings (1,058) 1,054
Increase (decrease) in other
comprehensive income 80,517 (80,517)
Comprehensive income (loss) 79,459 (79,463)
9 months ended Sept. 30, 2008
10% 10%
increase in decrease in
Canadian Canadian
dollar dollar
Increase (decrease) in net earnings 2,209 (2,212)
Increase (decrease) in other
comprehensive income 73,093 (73,093)
Comprehensive income (loss) 75,302 (75,305)
(c) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a
financial instrument fails to meet its contractual obligations. The Company`s
cash equivalents and short-term investments are held through large Canadian and
South African financial institutions. Short-term and long-term investments
(including those presented as part of cash and cash equivalents) are composed
of financial instruments issued by Canadian and South African banks and
companies with high investment- grade ratings. These investments mature at
various dates over the current operating period. The Company did not invest in
any asset backed commercial paper.
The Company currently sells all of its concentrate production to one customer
under an off-take contract. The loss of this customer or unexpected termination
of the off-take contract could have a material adverse effect on the Company`s
results of operations, financial condition and cash flows. The Company has not
experienced any bad debts with this customer.
The Company minimizes credit risk by reviewing the credit risk of the
counterparty to the arrangement and has made any necessary provisions related
to credit risk at September 30, 2008.
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
13. Management of financial risk (continued)
(d) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its
financial obligations as they fall due. The Company has a planning and
budgeting process in place to help determine the funds required to support the
Company`s normal operating requirements on an ongoing basis and its
expansionary plans. The Company ensures that there are sufficient funds to meet
its short-term business requirements, taking into account its anticipated cash
flows from operations and its holdings of cash and cash equivalents.
(e) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates. The Company is exposed to interest rate risk on its short-term
investments. The risk that the Company will realize a loss as a result of a
decline in the fair value of short-term investments is limited because these
investments, although available for sale, are generally held to maturity. The
Company monitors its exposure to interest rates and has not entered into any
derivative financial instruments to manage this risk.
14. Fair value estimation of financial instruments
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. The fair value of financial
instruments that are not traded in an active market is determined using a
Black-Scholes model based on assumptions that are supported by observable
current market conditions. Changes in these assumptions to reasonably possible
alternative assumptions would not significantly affect the Company`s results.
The fair values of cash and cash equivalents, short-term investments, trade
receivables and accounts payable approximate their carrying values due to the
short-term to maturities of these financial instruments.
The fair value of short-term debt was determined using discounted cash flows at
prevailing market rates and the fair value is considered to approximate
carrying value.
The Company has assessed these financial instruments in light of the current
market conditions and has not identified any impairment.
15. Subsequent events
From October 1, 2008 to November 13, 2008, 275,000 stock options were exercised
at Cdn$0.56 per common share for proceeds of Cdn$154.
For further information contact:
Investor Relations
Website: www.eastplats.com
Email: info@eastplats.com
Tel: 1-(604)-685-6851, Fax: 1-(604)-685-6493
NOMAD: JSE Sponsor:
Canaccord Adams Limited, London PSG Capital (Pty) Limited,
Email: South Africa
Ryan.Gaffney@canaccordadams.com Email:anjem@psgcapital.com
Tel: +44 20 7050 6500 Tel: +27 21 887 9602
Date: 13/11/2008 17:00:36 Produced by the JSE SENS Department.
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